A combination of low interest rates, tight inventory and a booming economy has created near-ideal conditions for house flippers who buy property, fix it up, then sell it for a quick profit. But prospects of a recession could quickly change that equation, experts warn.
"We're certainly reaching the top of the bubble," said Taylor Denchfield, a Washington, D.C.-area real estate broker, in an interview with CNBC's "American Greed."
Denchfield says he has been flipping homes since he was 17 (he is now 25).
Data from the first three months of this year suggests the flipping market has already begun to cool off.
Flippers turned around more than 49,000 homes in the first quarter, according to real estate research firm Attom Data Solutions. That represented 7.2% of all home sales for the quarter, which was the highest rate since 2010. But profits from those sales declined by nearly 10% from the same period one year ago. The average return on investment — 38.7% — was the lowest since mid-2011. And the number of flippers dropped 11%.
"Investors may be getting out while the getting is good, before the market softens further," said Todd Teta, chief product officer at Attom.
But Denchfield said that is no reason to panic.
"There is still some money to be made, but you have to be a lot more diligent in the deals that you're doing today," he said.